We hear a lot about IRAs and what a valuable long-term savings tool they can be, but how much do you really know about them? Here's the scoop on IRAs and how they can help you reach your retirement savings goals.


1. Only 33% percent of Americans have an IRA. That's the latest tally from TIAA's latest survey. The study also reveals that 56% of Americans think all IRAs are the same, when in fact they come in a number of varieties. There are actually four distinct types of IRA: traditional, Roth, SEP, and SIMPLE. Each option has its own benefits and drawbacks, so it pays to learn more about how these plans work.

2. IRAs have been around for more than four decades. They were first introduced back in 1974, and at the time, the annual contribution limit was just $1,500 per person. Currently, it's up to $5,500.

3. Catch-up contributions weren't always available. It wasn't until 2002 that workers 50 and older were given the option to sock away a little extra cash for retirement. Today, older Americans can contribute an extra $1,000 per year for a total of $6,500.

4. Some people can put up to $54,000 into an IRA each year. If you're a small business owner or are self-employed, you can contribute up to 25% of your salary to a SEP (Simplified Employee Pension) IRA for a maximum of $54,000 in 2017.

5. The average near-retiree aged 60 to 64 has just over $165,000 saved in an IRA. Now that may seem like a decent amount of money, but when you consider the fact that Americans are living longer these days, over the course of a 30-year retirement, that leaves the average saver with roughly $460 a month in income. Even when you factor in Social Security benefits, which currently pay an average of $1,360 per month, that's still only $1,820 a month in retirement income, which isn't enough to sustain a large number of seniors.

6. Americans paid a collective $221 million in early IRA withdrawal penalties in 2013 . While this isn't good news, it's an improvement over the previous year's total of $456 million, and it shows that Americans are getting smarter about avoiding early withdrawals. Generally speaking, if you remove funds from your IRA before reaching the age of 59 1/2, you'll be assessed a 10% early withdrawal penalty. (Note that you can withdraw your principal Roth contributions at any time without penalty.) There are some exceptions, however, that can help you avoid that consequence. If you withdraw funds early to buy a first-time home or pay for qualified higher education expenses, you can typically take that money penalty-free -- though you'll still pay taxes on your distribution.

7. Roth IRAs have become more popular than traditional IRAs. In 2013, Roth IRAs saw a larger number of total contributions than traditional IRAs despite the restrictions involved in funding them. Currently, anyone who earns more than $133,000 as a single tax filer or $196,000 as a married couple filing jointly is ineligible to contribute to a Roth (though a backdoor Roth IRA solves this problem). Still, it's not surprising that so many savers prefer the Roth IRA over its traditional counterpart. Though Roth IRAs don't offer an up-front tax benefit for contributing, withdrawals taken in retirement are tax-free. Furthermore, Roth IRAs don't impose required minimum distributions, which means you can leave your money to sit and grow indefinitely.

8. Americans risk losing millions each year in IRA funds. Unless you have a Roth, you're required to start taking withdrawals from your IRA once you turn 70 1/2. If you neglect to withdraw that money, you'll face a penalty equal to 50% of the amount you failed to take out. In other words, if your required minimum distribution amount is $5,000 and you don't take it, you'll lose $2,500 right off the bat. It's estimated that over 250,000 savers failed to take required minimum distributions valued at $348 million back in 2006 and 2007. Ouch.

Contributing to an IRA can help you amass a sizable nest egg in time for retirement, and the sooner you open one, the more opportunity you'll have for your money to grow. As an example, if you were to start maxing out your IRA at age 35 and continue contributing $5,500 a year for 30 years, you'd have $623,000 by age 65 assuming an 8% average annual return. You can visit our IRA Center for help in finding the right retirement account for you.